Microsoft Bumped From 250 West 55th Street

Microsoft has been bumped from 250 West 55th Street, leaving it with two likely space possibilities: a renewal deal at its current home at 1290 Avenue of the Americas or a relocation to 11 Times Square several sources familiar with the company say.

The company had been in advanced talks to take space at the tower, which is being built by Boston Properties, but was pushed aside when the law firm Kaye Scholer committed to take 260,000 square feet there in recent weeks. Kaye Scholer and another tenant that previously leased space at the building last year, the law firm Morrison Foerster, will occupy lower floors and space in the one million-square-foot building’s midrise, leaving only the top floors available, which are out of Microsoft’s price range.

11 Times Square

For months Microsoft has been searching the office market for around 250,000 square feet for its Manhattan headquarters, considering several sites including 51 Astor Place, a new development being built south of Union Square. In recent weeks however, it had seemed to whittle its options to either 1290 Avenue of the Americas or 250 West 55th Street, a choice that boiled down several competing factors.

Vornado, the owner of 1290 Avenue of the Americas, was said to be offering Microsoft a compelling economic deal to keep the company in place. 1290 Avenue of the Americas is also located closer to the heart of Midtown than 250 West 55th Street, a tower that sits along Eighth Avenue. On top of that, Vornado has committed to updating 1290 Avenue of the Americas, recently beginning a complete renovation of the 2.1 million-square-foot property’s lobby.

Yet 250 West 55th Street will be a brand new office tower with all the bell and whistles of a freshly constructed office tower, including advanced building systems, state of the art design and first rate amenities befitting a trophy property such as floor to ceiling glass windows, high ceilings and stunning views. Though a deal at 250 West 55th Street would be pricier, it was also enticing for a tech company whose brand, image and culture are all badly in need of invigoration.

Microsoft, once at the pinnacle of the technology industry and the most valuable corporation in the world has slid badly from that apex in relation to new tech giants Google, Apple and Facebook (a deterioration profiled recently in Vanity Fair).

“They have all the markings of a large, stodgy bureaucracy,” said one source who observed how Microsoft let its deal slip away at 250 West 55th Street.

In recent weeks, 11 Times Square reemerged as an option for Microsoft, though it’s not clear whether it was before or after the deal at 250 West 55th Street was scuttled. Sources say that SJP Properties, 11 Times Square’s landlord, reached out to Microsoft to restart conversations. Microsoft had previously considered taking space in the building, which was developed in recent years, but dropped out of talks in past months because it felt the building’s rents were too high. SJP has garnered a reputation for holding firm to lofty rental targets at the property, even as large pockets of vacancy have festered at the property.

Microsoft may have felt compelled to also reenter negotiations with SJP, especially after the deal at 250 West 55th Street collapsed. Creating competition between at least two office locations is considered an essential strategy in any tenant’s search in order to try to squeeze the best rent out of a landlord.